HAWAII ESTATE AND GENERATION SKIPPING TRANSFER TAXES (July 2012)

HAWAII ESTATE AND GENERATION SKIPPING TRANSFER TAXES

On July 5, 2012, Governor Abercrombie finally signed into law the Estate and Generation-Skipping Tax Reform Act, which is Act 220. Parts of this law were badly needed to clean up the poorly written Hawaii Estate Tax law which became effective in 2010.

The law applies to deaths and taxable transfers occurring after January 25, 2012. It provides for both an estate tax and a generation skipping tax. The intent of the law is to have the Hawaii law read more

2012 Estate Planning Update (January 2012)

Here is a 2012 update on important numbers used in Estate Planning and Medicaid Planning in Hawaii.

How much money and property can a person have at death without paying estate taxes?

Under a temporary federal law, $5,000,000 is tax free this year. From January 1, 2013, only $1,000,000 will be tax free.  There is a bill in Congress, introduced on November 17, 2011, called the “Sensible Estate Tax Act of 2011,” which proposes to reduce the exemption to $1,000,000 immediately. You can track this read more

Hawaii State Death Tax Calculation Chart (April 2011)

Hawaii State Death Tax Calculation Chart

 

Step 1: Determine Taxable Estate (from federal form 706, Part 2, Line 3) (However, use $3.5M as exemption)*

Step 2: Determine Adjusted Taxable Estate (Subtract $60,000 from Taxable Estate in Step 1)

Step 3: Find Adjusted Taxable Estate on Chart Below and calculate tentative tax

(A) Adjusted Taxable estate, equal to or more than… (B) and, Adjusted Taxable estate, less than… (C) Base Tax on amount in column (A) (D) Rate of Tax on excess over amount in column (A) (%)
$ 0 $ 40,000 $ 0 0.0
$ 40,000 $ 90,000 $ 0 0.8
$ 90,000 $ 140,000 $ 400 1.6
$ 140,000 $ 240,000 $ 1,200 2.4
$ 240,000 $ 440,000 $ 3,600 3.2
$ 440,000 $ 640,000 $ 10,000 4.0
$ 640,000 $ 840,000 $ 18,000 4.8
$ 840,000 $ 1,040,000 $ 27,600 5.6
$ 1,040,000 $ 1,540,000 $ 38,800 6.4
$ 1,540,000 $ 2,040,000 $ 70,800 7.2
$ 2,040,000 $ 2,540,000 $ 106,800 8.0
$ 2,540,000 $ 3,040,000 $ 146,800 8.8
$ 3,040,000 $ 3,540,000 $ 190,800 9.6
$ 3,540,000 $ 4,040,000 $ 238,800 10.4
$ 4,040,000 $ 5,040,000 $ 290,800 11.2
$ 5,040,000 $ 6,040,000 $ 402,800 12.0
$ 6,040,000 $ 7,040,000 $ 522,800 12.8
$ 7,040,000 $ 8,040,000 $ 650,800 13.6
$ 8,040,000 $ 9,040,000 $ 786,800 14.4
$ 9,040,000 $ 10,040,000 $ 930,800 15.2
$ 10,040,000 . . . . . . . . $ 1,082,800 16.0

2010 Okura & Associates

* The State of Hawaii says the exemption is $3.5 million, but the law is ambiguous and it may be arguable that the state exemption should be $5 million during read more

Take Advantage of the New Gift Tax Law (February 2011)

The new tax law gives us a wonderful opportunity to protect assets from nursing home costs and also from taxes.  It makes temporary changes to the federal tax laws.  It allows you to give away during your lifetime up to $5 million of assets without any gift tax.  From January 1, 2013, there will be an estate tax if you die with more than $1 million, and there will be a gift tax if you give away more than $1 million.  The tax rate starts at 41% from the first dollar above $1 million, and goes read more

The New Estate Tax Law (January 2011)

Happy New Year, everyone!  We have some exciting new tax laws.  On December 17, 2010, President Obama signed into law the 2010 Tax Relief Act.  I will explain the most important changes in estate and gift taxes.

Temporary Law.  Important parts of the new law are only temporary.  If Congress does not further change the law, many of the benefits of the new law will disappear on January 1, 2013.

$5,000,000 Exemption.  The federal estate tax exemption read more

The New Hawaii Estate Tax (June 2010)

There is now a new Hawaii estate tax.  The bill proposing the tax (House Bill 2866) was vetoed by Governor Lingle on April 25, 2010.  The Hawaii legislature overrode the veto on April 29, 2010, and the bill became Act 74 on April 30, 2010.  It imposes a tax on the estates of persons dying after April 30, 2010.

Let me first explain the history of the Hawaii inheritance tax and the Hawaii estate tax.  An estate tax is a tax on the property of someone who has died.  The federal death tax is an read more

An Unusual Year for Tax Law (February 2010)

2010 – AN UNUSUAL YEAR FOR TAX LAW

There is no federal estate tax this year.  Since the State of Hawaii has no inheritance tax, Hawaii residents can die this year with any amount of assets and pay no death taxes at all.  This is only for the year 2010.  For someone dying in 2011 or later years, any assets not inherited by a spouse or a charitable organization will be taxed, starting at a tax rate of 41% from the first dollar over 1 million, and going up as high as 55% for amounts over 3 million read more

Proposed New Laws

PROPOSED NEW LAWS

There are some proposed new rules and laws which would affect estate planning.  First, let’s review the current estate tax law.  The estate tax is a federal tax.  At this time there is no Hawaii estate tax or inheritance tax.  As a result of the 2001 tax act, the current estate tax law is very strange.  A person can die in 2009 with up to $3,500,000 of assets without any estate tax.  For amounts over $3,500,000, the estate tax rate is 45%.  In 2010 there is no estate read more